Google scored a partial victory yesterday in a case that is likely to have major implications for the evolution of copyright law online. In a 2004 lawsuit, porn merchant Perfect 10 accused Google of infringing its copyrights in two ways: by displaying thumbnails of its images in its search results and by framing third-party web sites that contain full-size copies of its images when the user clicks on a thumbnail.

On the first charge, Google responded by citing the landmark Kelly v. Arriba Soft case, which first held that the use of thumbnails in an image search engine was a legally protected fair use. Perfect 10 attempted to distinguish its service from the Kelly precedent in two ways. First, although Google doesn't typically display advertising on image search result pages, some of the sites containing infringing images participate in Google's AdSense program. Second, Perfect 10 had licensed its images for sale in thumbnail form to cell phone users, and the company argued that the thumbnails in Google's search results undermined the market for cell-phone thumbnails. The district court sided with Perfect 10 in 2004, and Google appealed the decision.

Writing for the Ninth Circuit Court of Appeals, Judge Sandra Ikuta firmly rejected both of those arguments. She noted that there was no evidence that any mobile phone users had actually used Google's image search engine to download Perfect 10's images. And while she acknowledged that Google did generate a small amount of revenue from infringing web sites that participated in the AdSense program, she ruled that "the transformative nature of Google's use is more significant than any incidental superseding use or the minor commercial aspects of Google's search engine and web site."

On the question of whether Google was liable for framing third-party web sites containing infringing content, the district court had sided with Google, and Ikuta upheld that part of the ruling. She noted that Google merely provided the user's browser with the address of the web site containing the infringing material; the material itself passed directly from the third-party web site to the user without ever coming into contact with Google's servers.

The case is not over, however. While Ikuta rejected most of Perfect 10's arguments regarding direct liability for thumbnails, she found that the district court had failed to properly consider whether Google could be found liable under the Napster precedent for failing to respond adequately to Perfect 10's notifications that Google's search results linked to infringing content. She sent the case back to the district court which will give more consideration to whether Google should have done more to remove links to infringing pages.

In any event, the decision will bolster Google's case in its ongoing battle with book publishers over its Book Search product. Book Search is indisputably a transformative use of the books it indexes, and so Ikuta's holding that transformative uses are fair even if they have a commercial aspect to them would seem to apply directly to Google Book Search.

Timothy B. Lee / Timothy covers tech policy for Ars, with a particular focus on patent and copyright law, privacy, free speech, and open government. His writing has appeared in Slate, Reason, Wired, and the New York Times.